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Foreclosure reforms could take a year or more

The chief federal regulator for many of the largest financial institutions said reforms to the nation's foreclosure system will take "a year and more" to complete.

Citing pervasive misconduct in the way banks repossessed homes from borrowers, federal regulators ordered the nation's biggest 14 banks to overhaul their procedures and compensate homeowners injured financially by wrongdoing or negligence.

In remarks to the Institute for International Finance in Washington on Friday, acting Comptroller of the Currency John Walsh said that because of the complexity of the reforms needed, the process would not be a fast one.

"I wish it could be completed more quickly, but it’s important that it be done correctly and in a way that assures fair treatment for homeowners who underwent foreclosure proceedings," he said. "That’s the only way to restore confidence in the system, and it is my hope that the assurance that both past errors and future practices are being corrected will restore confidence much sooner."

The details of the independent reviews of each mortgage servicer ordered to reform its practices by the various federal regulators who conducted the probes will be made public shortly, Walsh said. The amount of money that banks will pay to borrowers remains "open-ended and will only be known when the process ends."

Borrowers who were foreclosed on in 2009 and 2010 are allowed to request a review of their case if they feel they have been wronged by banks' practices. The orders signed by the banks in April required them to hire independent consultants to design a process to review each case.

The banks efforts will include a "massive campaign" to contact borrowers through mailing, tracing techniques used in class action filings and through an advertising campaign, Walsh said. His comments came on a day that a separate group of regulators -- a coalition of attorneys general and federal agencies -- held meetings with the nation's largest mortgage servicers in hopes of hammering out a settlement with them over faulty foreclosure practices.

"Any enforcement actions or settlement agreements they undertake will place additional requirements on the servicers, and it is essential that we harmonize the requirements of our orders with those of other regulators if and when they are reached," Walsh said. "It just doesn’t make any sense to have multiple sets of requirements and standards apply to the same servicers operating in the same markets."